GST Refund explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Software and IT-enabled service companies often carry large balances of unused GST credit. They pay GST on office rent, cloud hosting, subcontractors and recruitment, and charge none to foreign clients. The GST refund for software exporters turns that credit back into cash. It works well if three things line up: the contract structure, the timing of receipts, and a clean split of the credit ledger.
Development, design, programming, customisation, upgradation and implementation of IT software is a supply of services (Schedule II of the CGST Act). It is an export of services only if all five conditions in section 2(6) of the IGST Act are met, with the place of supply outside India (usually the client's location under section 13(2)) and payment received in convertible foreign exchange. Most IT exporters supply under LUT (RFD-11) and claim ITC in RFD-01; the export turnover is payments received, proved with FIRC/BRC/e-BRC, and ITC on laptops and servers booked as capital goods is excluded from the refund.
When IT services qualify as exports
The general conditions are covered in GST refund on export of services. The IT-specific questions are these:
| Situation | Export of services? | Why |
|---|---|---|
| Custom development for a US client, delivered online | Yes, if paid in foreign exchange | Place of supply is the recipient's location (s.13(2)) |
| SaaS subscription sold to a foreign business | Generally yes | Same default rule; check the recipient's location in the contract |
| Services to the foreign parent or group company | Yes, subject to other conditions | Circular 161/17/2021-GST: Indian company and foreign company are separate persons |
| Services to your own branch or office abroad | No | Condition (v): these are establishments of a distinct person |
| IT support or client acquisition as an intermediary, on or after 30.03.2026 | Can qualify | Section 13(8)(b) IGST omitted; the default rule applies |
| Services tied to hardware the client ships to India for repair or testing | Check carefully | A specific place-of-supply rule may place the supply in India |
The intermediary change matters to IT firms that arrange or facilitate services between a foreign principal and its customers. Before 30.03.2026 the place of supply was in India and the supply was taxable; for supplies on or after that date the default rule applies. See intermediary services: section 13(8)(b) omitted.
If your contracts mix development, support and reselling, our LUT export refund team can classify each revenue stream before you file.
LUT or IGST route for an IT company
Almost all software exporters use the LUT. File RFD-11 on the portal before the year's first export invoice; it is accepted on generation of the ARN and is valid for the financial year. Invoices then carry no IGST and the accumulated credit is claimed in RFD-01, category "export of services without payment of tax".
The IGST route is also open for services: you pay IGST on the export invoice and claim it back in RFD-01 under Rule 96(9). It is worth considering only when the credit ledger holds a large capital goods balance that cannot otherwise be used (see below).
Milestone billing and the refund formula
Rule 89(4) uses payments received during the refund period, not invoices raised. For service exports, the zero-rated turnover is:
- payments received during the period for export services, plus
- services completed during the period against advances received earlier, minus
- advances received during the period for services not yet completed.
IT contracts often run on retainers, milestones and advances, so this adjustment is where many claims go wrong.
Illustration (round figures): An IT company's quarter:
- foreign receipts: ₹2.5 crore, including a ₹30 lakh advance for a module to be delivered next quarter;
- a milestone completed this quarter against a ₹20 lakh advance received last quarter;
- domestic turnover: ₹60 lakh;
- ITC on input services (rent, cloud, subcontractors): ₹32 lakh;
- ITC on laptops and servers capitalised in the books: ₹8 lakh.
Zero-rated turnover = 250 + 20 − 30 = ₹2.4 crore. Adjusted total turnover = 240 + 60 = ₹3 crore. Refund = 240 × 32 ÷ 300 = ₹25.6 lakh. The ₹8 lakh on laptops and servers stays out of the calculation.
Check your own figures on the GST refund calculator.
The laptop problem: capital goods credit
IT companies buy a lot of hardware. Where laptops, servers and network equipment are capitalised, their credit is ITC on capital goods, and "Net ITC" in Rule 89(4) covers only inputs and input services. The Refunds Handbook confirms that capital goods credit is not refundable under the zero-rated formula. Including it is a frequent reason for recovery later. The options are covered in refund of ITC on capital goods for exporters.
Proof of realisation: FIRC, BRC and e-BRC
Rule 89(2)(c) requires a statement of invoices with the relevant BRCs or FIRCs for service exports. On the portal this is Statement 3, which carries invoice-wise FIRC/e-BRC details and is checked against GSTR-1. The Refunds Handbook notes that without these documents the application can be treated as incomplete.
Practical points for IT finance teams:
- map each foreign receipt to specific invoices; one remittance often pays several invoices, less bank charges;
- receipts in INR count only where RBI permits; Circular 202/14/2023-GST accepts payments through Special Rupee Vostro Accounts (see INR vostro receipts);
- file for the period in which money is received, because the relevant date for services is the date of receipt of payment (or the invoice date where payment came in advance).
Two more IT-specific points
- STP units buying goods. Supplies of goods to EOU, EHTP, STP and BTP units are deemed exports under Notification 48/2017-Central Tax, following Circular 14/14/2017-GST. Either the unit or its supplier can claim the refund; see deemed export refund: who claims.
- Unpaid invoices. Under Rule 96A, if payment for services exported under LUT is not received within one year of the invoice, or the FEMA period with any RBI extension if later, IGST becomes payable with interest. Review old receivables before each claim.
After filing, the officer acknowledges or issues a deficiency memo within 15 days. Export claims are eligible for 90% provisional refund, and from 01.10.2025 Rule 91(2) provides for the RFD-04 order within 7 days of acknowledgement, based on system risk evaluation.
Need help with a software export refund?
IT refund claims are usually lost on detail: receipts matched to the wrong invoices, advances not adjusted, or laptop credit in Net ITC. We rebuild the payment-based turnover, clean up the credit split and file RFD-01 period by period. See our export refund under LUT service, or the GST refund on exports page for the wider picture.
Key takeaways
- Software development and IT services are services; they are exports only when all five section 2(6) IGST conditions are met.
- Services to a foreign group company can qualify; services to your own overseas branch cannot.
- From 30.03.2026, intermediary IT services to foreign principals can qualify as exports.
- The refund formula uses payments received, adjusted for advances, backed by FIRC/BRC/e-BRC.
- Capitalised laptops and servers carry capital goods credit, which is outside Net ITC.
Read next
- GST refund for exporters: both routes explained
- Statement 3 for GST refund on export without payment
- GST refund for self-employed professionals exporting services
- Zero-rated supplies, LUT and refund
Disclaimer: Positions stated as on 30 September 2026, based on the CGST Act and Rules as amended, the Finance Act 2026, and the ICAI Handbook on Refunds under GST (January 2026). Verify current notifications before filing.